Free Labor, Free Organizations,Competition and a Sports Analogy

I have enjoyed the discussion on Orly’s book and thought of an interesting analogy to sports that is worth sharing. The inspiration was Haddock, Jacobi, & Sag, “League Structure & Stadium Rent Seeking–The Role of Antitrust Revisited,” 65 Florida Law Review 1 (2013), an offprint of which appeared in my box the other day. I recommend the article for those interested in regional economic development, sports franchising, antitrust and composing a title for an academic article without using a colon. The ideas below are inspired by the article but represent my own views, not those of the authors.

Free agency in sports is desirable along the lines of Orly’s argument. Talented players are not locked into a particular team and can auction their skills off to the highest bidder. I think the case is strong for free agency as benefitting individuals and society. One can complain about rent seeking and about the dynamics that lead to improper behavior like doping. As far as rent seeking, it is a loaded term like piracy or pornography, acting more as a conclusive label rather than an analytical concept. Orly’s argument supports rent seeking when it benefits talent and helps to unlock it. As far as the dark side of competition (doping or cheating), those can be handled through other means than limiting free agency.

Does the free agency argument translate over into the firm or organizational level? As Haddock, Jacobi, & Sag point out, there is lots of wasteful behavior as sports teams threaten to move in order to get better franchise deals from cities. I understand their argument to be that the industrial structure of sports franchises in the United States leads to such opportunistic behavior as strapped and often desperate cities cannot effectively respond to the threat of exit by a team. They contrast the US sports team structure with that in the UK, where teams rely more on fan support rather than public subsidies. Consequently, municipalities often have several sports teams that compete among themselves.

I found this example fascinating for the purposes of this symposium. First of all, the free agency point maps readily onto Orly’s point. Competition among players is perhaps more effective and arguably more fair than competition among teams where players are locked into the firm and its mechanisms (if any) for internal competition. At the same time, arguments for free competition do not readily transfer over to the franchising level given the industrial organization of teams and their relationship with cities. The answer to the problems Haddock et al. identify for sports franchising in the US lies in altering the political and market structure within which bargaining and competition for franchises occur. The example illustrates the relationship between individual mobility, competition internal to an organization, and the background structure of competition that defines how interactions among and within organizations play out.

1 Response

I think this is a great analogy, because you can also focus on the downsides of free agency: focus on self rather than team, focus on short term rather than long term, decreased job security, decreased incentives to achieve post move, migration of talent to market leaders at the expense of new or poorer entrants, etc.

I doubt that the parallels are identical, but they are illuminating all around.